Posted Tuesday, August 19, 2008 by
David Barlow
Historically, relocation program managers have required transferees to submit receipts for most relocation expenses. This requires the transferee to gather, account for and then submit receipts. Someone then has to review and then approve/deny the numerous relocation expenses incurred during the relocation process. Because this is a very labor intensive process (i.e. reviewing receipts), the practice of providing transferees with a set lump sum for certain corporate relocation expenses has grown in popularity. Lump sums first began with the introduction of the Miscellaneous Expense Allowance (MEA), which set forth the idea of providing one lump sum amount to cover small miscellaneous expenses. The use of lump sums was then expanded to pay for food expenses (per diems), based on a fixed daily amount, and then lump sums were set for specific relocation features—such as the home finding trip. In this example, the home finding lump sum would be sensitized per transferee by using the number of trips and total days allowed in the policy, as well as the cost of the destination location.
Today’s tough real estate market has led to an increase in policy exception requests—primarily in the area of temporary housing. Most policies have been designed to offer specific benefits (i.e. home finding, temporary living, etc.), but now—given the state of the real estate market—more and more companies have begun grouping specific taxable benefits into one managed lump sum. A current best practice approach is to take the trio of home finding, temporary living and miscellaneous expense benefits and combine them into one managed lump sum amount—allowing the transferee to choose how they wish to spend this money, versus a “one-size-fits-all” approach. By having a managed lump sum program, exceptions decrease since transferees are empowered to spend their lump sum on the expenses which are a priority to them. And lastly, companies can share in the savings, as lump sums often cost less than providing relocation reimbursements individually.
If you are interested in incorporating managed lump sums into your relocation program or need more information, you can e-mail me at
david.barlow@sirva.com .
For more information about managed lump sums, please review our
white paper.
